Taking out a loan as a teenager can be incredibly dangerous, especially if you don’t have the money to pay it back or you run into financial problems down the line.
With that in mind, here are the top five ways to avoid taking out loans as a teenager so you can stay financially secure and stress-free through the high school years and beyond.
1. Work
Getting a job is arguably the best ways to stay out of loans as a teen. By so doing, you can set up an emergency fund with some money in it. This will keep you from having to take out loans in case of emergencies.
You should also try and establish good credit by making timely payments on bills and not opening any new lines of credit unless absolutely necessary.
Bonus: Live within your means
This includes avoiding high-interest debt like payday loans that cost more than 10% interest per month.
Look for ways to work through college without needing student loans by finding a summer job or using scholarships, grants and part-time jobs while still in school.
Only borrow money when you need it if you can’t afford what you want without going into debt.
And if you must get a loan, make sure that there are no strings attached so that the lender doesn’t own anything when they let go of their claim on your money.
2. Get an after-school job
If you are a teenage student, one way you can avoid taking out a loan as a teenager is by getting an after-school job.
Working at least 20 hours per week will allow you to save up for the things you want and need.
Plus, it’s never too early to start saving! After getting a part-time job: Earn enough money to cover your expenses and maybe even have some left over for fun activities with friends or family members.
Bonus:Keep your grades high:
If you have good grades, there are more opportunities available to you when looking for scholarships, jobs, and other ways of earning money without taking out loans.
When applying for scholarships, be sure to list all of your extracurricular activities on the application.
Doing so might give you an advantage in winning a scholarship that could help put college tuition costs within reach.
3. Develop a Skill
In order to make money, you need skills. You may not think you have any skills, but take some time and look around.
What are your hobbies? What do you like doing? If you enjoy drawing, this might be an excellent skill that could turn into a lucrative job if done professionally.
So what’s the downside of not taking out a loan as a teenager? Pretty much nothing! The only thing is that now it’s time for the real world.
For example, those who took out loans are starting to regret it because they can’t find jobs or need more than one job.
Even though there is no right answer on whether or not teenagers should take out loans when they’re still in school, here are some more tips on how to avoid them:
✓ ) Save up before you start college.
✓ ) Have a back-up plan in case things don’t work out with jobs.
✓ ) Think about where you want to go to college and research their scholarship opportunities.
✓ ) Apply for scholarships.
✓ ) Take advantage of internships.
✓ ) Get creative with ideas on how to make money while in school (i.e., car detailing).
4. Save
It can be hard to resist the temptation of taking out a loan when you’re faced with an expensive purchase.
But if you want your credit score and finances in general to be in good shape for years down the road, it’s worth doing what you can to avoid taking out loans.
Consider saving up some money before you buy something so that you don’t have to borrow from friends or family members or take on a loan.
And even if that doesn’t work, there are lots of other ways to save money, like negotiating on prices or buying used items.
If all else fails and you need to take out a loan, make sure it’s not too large of one!
The more you owe, the more difficult it will be to pay off those debts and get your finances in order.
So limit how much you borrow and make sure to prioritize paying off any debt over anything else, no matter how tempting it might be.
Plus, using your credit card wisely is key: Only use it when you really need to and then pay it off right away; keep in mind that interest rates on these types of cards tend to be higher than regular loans or lines of credit.
You should also try not to apply for new cards since this is another thing lenders consider when deciding whether or not to approve a loan application.
All these tips should help keep you from making costly mistakes as a teenager- although none of them will prevent teen angst completely!
5. Invest
It is never too early to start saving for the future. Even if you are not old enough for a bank account, you can still invest in yourself.
Have your parents open up an investment account for you and set aside some money every week or month.
If your parents refuse, have them invest in something that will let you earn back the money (like paying for it out of your allowance) and then let you keep what’s left over.
The more time you spend investing, the more you will be able to invest later on.
Bonus: Keep credit cards at bay:
Credit cards sound like a great way to get into the spending habit before even getting into college but they come with high-interest rates that make repayment impossible.
Conclusion
Avoiding taking out loans can be tempting as a Teenager, after reading this article I’m sure you must have made a decision on what to do whenever the thoughts of a loan comes in mind.
Plus, don’t buy things just because they are on sale: Buying something just because it is on sale does not save any money. It just ends up costing more when all of those little purchases add up!
